No recovery until 2010, eurozone ministers warn

Brussels, March 10 (DPA) The European economy is in much worse shape than previously anticipated and will not recover from recession before 2010, eurozone finance ministers have warned. However, European governments will resist US calls to expand their existing stimulus packages, which would run up further debt, ministers said Monday.

“We have seen a considerable deterioration in the economic situation since our February meeting, and there is no obvious indicator which gives us any reason to believe that the situation is turning around,” said Luxembourg Prime Minister Jean-Claude Juncker, who also holds the finance minister portfolio in his cabinet and chairs the monthly meetings of the 16 European Union countries that share the euro.

“All the forecasts that we have available are extremely gloomy. This is a deep recession that we are going through, certainly deeper than what we saw at the beginning of the 1990s.”

The EU’s economic and monetary affairs commissioner, Joaquin Almunia, cited lingering problems in the credit markets, plummeting industrial production and sharp drops in demand for European products in the US, Japan and China as factors that make an economic recovery unlikely before 2010.

The European ministers rejected calls by Larry Summers, chief economic adviser to US President Barack Obama, for Europe to step up its efforts to counter the global recession.

“Recent American appeals insisting that Europeans make an additional budgetary effort to combat the effects of the crisis were not to our liking,” Juncker said. “Europe and the euro group have done what they needed to do.”

He noted that combined European efforts to counter the recession were expected to total 3.3 to 4 percent of the bloc’s gross domestic product.

“We want to see what the effect of the recovery package is going to be,” Juncker said. “We don’t feel that we need to pile deficit on top of deficit and add further to our debt.”

Earlier Monday, German Finance Minister Peer Steinbrueck said that having already approved stimulus measures worth more than 80 billion euros, Europe’s economic locomotive was “not planning on any additional measures”.

The meeting of eurozone ministers came four days after the European Central Bank (ECB) issued new projections showing that the euro area’s GDP could shrink this year by a worse-than-expected 3.2 percent.

Earlier Monday, EU employment and social affairs ministers warned that the “unprecedented recession” affecting the 27-member bloc could add 6 million workers to the jobless rolls by 2010, resulting in “severe social consequences, affecting households and individuals”.

Romania became the latest European country to seek outside help to cope with the crisis, with Romanian President Traian Basescu telling the country’s parliament Monday that he would be seeking assistance from the EU and the International Monetary Fund (IMF).

Reports last month suggested Romania would likely need up to 7 billion euros ($8.8 billion) in budgetary support. The European Commission has already raised billions of euros from financial markets to help out Latvia and Hungary.

Almunia rejected Austrian suggestions that EU governments would soon have to increase bail-out resources at the disposal of the European Commission.

“At the moment, the resources are more than sufficient to meet the needs of further European contributions,” Almunia said, noting that EU leaders had already agreed in December to raise this fund to 25 billion euros.

Eurozone ministers agreed on the need to increase the lending capacity of the IMF, “given the current circumstances”.

Finance ministers were expected to back calls to double IMF resources to $500 billion at a meeting extended to all of the EU’s 27 member states later Tuesday.